What's on our minds this week:

A whirlwind of activity clearly has the arrow pointing up for the prospects of tax reform. The legislative process is moving fast and has undeniable, even surprising, momentum. It could all still crumble and come to nothing—or to very little. But with the breakneck approval last week of the House for its bill, even the most hardened tax reform skeptic must acknowledge that this could all now happen.

When Congress returns from its Thanksgiving week break, the next and the highest hurdle looms—passage of a bill through the full Senate. That’s no sure thing, even though reconciliation would allow them to do so with GOP-only votes. But keeping 50 out of 52 Republicans together on something as sweeping and controversial as tax reform is going to be a monumental task for Majority Leader Mitch McConnell and his team.

Putting aside the complexity created by the late addition to the Senate bill of a proposal to essentially repeal the Affordable Care Act’s individual mandate, it’s not yet clear that the GOP has the votes on the core elements of the tax reform bill. Voices have already been raised in opposition to the bill as currently constructed. With almost no votes to spare, any Republican can hold the bill hostage to get something he or she wants. And while they may be brought back into the fold, that will come at a cost.

But assuming the Senate can pass its own tax reform bill and quickly reconcile differences with the House, there is at least a possibility that a bill could find its way to the President’s desk in 2017.

This could still all come to naught. But with Congress having passed the test at each step of the way so far, the inescapable fact is that we are now closer to tax reform than any of us have been in a generation.

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A whirlwind of Congressional activity last week included important developments improving the prospects of tax reform. First, the House passed a tax reform bill, and the Senate Finance Committee followed quickly with approval of its own bill.

Even the most hardened tax reform skeptic would acknowledge that there real for enactment of significant tax legislation. Still, caution is warranted as this momentum could all still come to nothing—or to very little.

Next stop: Senate approval

Congress will be on recess during Thanksgiving week, and once it returns, the tax legislation will face its next—and biggest—hurdle: passage of a bill by the full Senate. That’s far from a sure bet.

With 52 Republican senators, the GOP can only afford to lose two votes (assuming it gets no Democrat support). Keeping 50 out of 52 Republicans together on something as sweeping and controversial as tax reform is going to be a monumental task for Majority Leader Mitch McConnell. And this task may have become more difficult, following a late addition to the Senate bill of a proposal to repeal the Affordable Care Act’s individual mandate.

Even aside from the individual mandate, it’s not clear that there are GOP votes in the Senate on the core elements of the tax reform bill. For example, Sen. Ron Johnson (R-WI) has already announced opposition to the bill “as currently constructed,” arguing that it disproportionately benefits corporations. Although he backtracked somewhat, saying he wants to find a way to support the bill, this is an indication that any Republican Senator can potentially hold up the tax bill to get something in return.

Assuming the Senate is able to pass its own tax reform bill, it would still need to reconcile differences with the House bill, which may prove difficult. One thing to watch for is whether specific amendments are added to the Senate bill to make it more acceptable to the House, for example, allowing at least a partial deduction for state taxes. If this occurs, it opens up a possibility that a tax bill could be on the President’s desk in 2017.

Staying the course

Despite some fits and starts, Congress has made real progress in its effort to enact significant tax legislation. Progress continued over the past week with remarkable speed. While it could all still come to naught, Congress is now closer to enacting significant tax reform than at any time since 1986.

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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

____________________

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.